Find in Library

This paper contributes on the literature of systemic risk by investigating the extent of financial distress injected by banks, financial services, and insurance firms in the financial system of Pakistan. Furthermore, the paper aims to investigate the empirical determinants of systemic risk. The systemic risk is calculated by using the Delta Conditional Value at Risk (∆CoVaR) methodology. The panel regression is used to investigate the determinants of systemic risk for the period 2000- 2015. We find that top most systemically important financial institutions of Pakistan are National Bank of Pakistan (NBP), Allied Bank Limited (ABL), and Habib Bank of Pakistan (HBP). Furthermore, size of financial institution, the loan ratio, the leverage ratio, the tier1 ratio, the operating profit margin ratio appears positively and significantly related to the systemic risk of financial institutions. The identification of systemically important financial institutions and its empirical determinants is important for devising the financial regulations and financial reforms.